What is demurrage?

The number of free days, and the daily rate, come from the shipping line or terminal tariff and your contract. They differ by line, port and container type, so read your own booking terms. The rate often rises in steps the longer the container stays, which is why a short delay can become an expensive one. (In bulk shipping, demurrage also means the charge a charterer pays when loading or discharge runs past the agreed laytime.)

This is a general explanation, not legal or customs advice.

Why demurrage matters

Goods that arrive on time can still cost you money if they cannot leave the port. A missing document, a customs hold or a late haulier all keep the container sitting there, and each day is billed.

For a distributor on thin margins, demurrage can wipe out the profit on a shipment. It also adds to landed cost, which buyers care about when comparing offers.

Demurrage versus detention

The two are often confused.

• Demurrage applies while the container is inside the port or terminal, usually after discharge for imports.
• Detention applies once the container has left the terminal and is with the merchant, until the empty container is returned.

The terminal may also charge its own storage fee. Check which terms apply on your route.

What causes demurrage

• Customs clearance is slow, or the declaration has errors, for example a wrong HS code.
• A document is missing or late, such as the commercial invoice, the packing list or the original bill of lading.
• The consignee has not paid the freight or release charges.
• No haulier is booked, or the warehouse cannot take the delivery.
• Payment under a letter of credit is delayed, so the bank does not release the documents.

Who pays demurrage

The contract of carriage names the party the shipping line charges, normally the consignee that collects the container. Between buyer and seller, the sale contract decides who finally pays. The Incoterm helps, but it does not by itself settle the question. Under DAP, for example, the buyer clears import, so import delays are generally the buyer's concern. Under DDP, the seller clears import and carries that cost.

State in your sales contract who pays if the delay is the other side's fault.

How to avoid demurrage

1. 1

   Know the free days before you ship

   Ask the shipping line or freight forwarder for the free time at the port of discharge.

2. 2

   Send documents early

   Share the invoice, packing list and bill of lading as soon as they are final, not on arrival.

3. 3

   Book the haulier before the ship arrives

   Have the collection slot and the warehouse space ready.

4. 4

   Pre-clear customs where possible

   Ask the broker to lodge the declaration before arrival, if the country allows it.

5. 5

   Track the container

   Watch for delays and warn the buyer the day a hold appears.

An example from product sales

Say a plastics supplier ships a container of granules to a buyer. The buyer's broker is waiting for the original bill of lading, which was posted late. The container arrives on Monday and the free time ends on Thursday.

Say the line charges $100 a day for the next five days and $200 a day after that. By the time the papers arrive and the container leaves, it has sat seven days past its free time. The buyer owes $900 (five days at $100 plus two at $200), before any detention. These figures are only an example.

Related terms

• Incoterms: they decide who handles import clearance.
• Freight forwarder: the party that tracks free time.
• Bill of lading: the document the line needs before it releases the container.
• Landed cost: demurrage adds to it.
• Lead time: port delays lengthen it.

How PromptLab handles it

Put the shipment documents in the account's Files tab so the team and the buyer's broker work from the same set. Record the agreed Incoterm in the trade terms field on the sales order and use a task to chase a missing document before the ship arrives. Tasks can also be created by a workflow, for example when a quote changes status.

Frequently asked questions

What is demurrage in shipping?

It is a daily charge when a full container stays in the port or terminal beyond the free time. The shipping line, or sometimes the terminal, bills it until the container is collected.

What is the difference between demurrage and detention?

Demurrage applies while the container is inside the port or terminal. Detention applies once the container is outside, until the empty is returned.

Who pays demurrage, the buyer or the seller?

The shipping line bills the party named in the carriage contract. Between buyer and seller, the sales contract and the Incoterm decide who bears the cost.

How many free days are there?

It varies by shipping line, port and container type. Check the line's terms for your booking before you ship.

How can I avoid demurrage?

Send documents early, book the haulier ahead, pre-clear customs where allowed and track the container. A forwarder can help with all of these.